Foreign Home Buyers Boosting Spain's Property Market

Residential property sales in Spain increased by 8.8% in June compared to the same month a year ago, the latest data from the National Statistics Institute shows.

The year on year increase in June is the fourth consecutive monthly rise following those experienced in March, April and May, when home sales rose by 22%, 5% and 5.4%, respectively.

The rising sales trend also ends 10 consecutive months of year on year declines and the growth is mainly due to the sales of existing homes while sales of new homes fell by 3% year on year.

The highest number of home sales per 100,000 population were in Valencia followed by the Canary Islands and the Balearics. In relative terms, the regions where home sales increased most year on year were Madrid with a rise of 30.4%, Extremadura up 25.7% and Navarra up 19.3%.

The largest decrease was in Castilla-La Mancha with a fall of 21.6% followed by La Rioja where sales fell by 12.8% and Castilla y León where they were down by 10.3%.

The figures come as a new report indicated that foreign demand for second homes on the Costa del Sol has been strong this year. Overseas buyers regard property in the area as a bargain, according to the report from real estate consultancy Aguirre Newman.

It also reveals that 90% of foreign buyers them can afford to buy without financing while local demand is hampered by lack of mortgage choice.

There was a slight increase in the number of new developments being started on the Costa del Sol, according to the report, with four new developments being started in 2013. Not a single new development was started in the preceding three years.

However, the number of new homes for sale fell by 18% in 2014, from 18485 to 16,508 homes, and 30% of new homes on the coast remain unsold.

The average new flat for sale on the Costa del Sol is 127 square meters with two bedrooms and costs €196,956, whilst the average single family homes is 279 square meters and costs €393,520. That means prices have fallen 5.7% and 9.7 % respectively in a year.

Looking forward, Aguirre Newman forecast that holiday home prices in the best areas close to services and amenities will stabilize in 2014, but continue to fall this year and next in less attractive locations, thanks to the excess inventory and weak demand from local buyers.